A catastrophic failure of Uber’s corporate governance?

Transport For London (Tfl) has cancelled car service Uber's operating licence in London amid concerns about a “lack of corporate responsibility” in the company.

A catastrophic failure of Uber's corporate governance? Or, a Tfl error of judgement?

If the former, Uber needs to get its house in order. Driven by consumer choice and evidenced by a 600,000 plus signatures-petition calling for Tfl to overturn it's decision, the company is clearly filling a gap in the market. Yet, according to its statement, TfL considers Uber's approach and conduct demonstrate a lack of corporate responsibility. This is in relation to a number of issues which have potential public safety and security implications.

Tech companies cannot hide from good corporate governance and corporate social responsibility. Many people were quick to condemn companies such as Facebook and Google recently over their UK tax status. So, we expect regulators to play their part in building trust and confidence across consumer markets. That role, however, must remain independent, fair, transparent and balanced, free from political interference and accountable. Preferably to Parliament, as is the case with the UK Information Commissioner and Ofcom.

Uber licence revocation

Tfl's original statement on its reasons for revoking the licence is scant on detail. It states "No further comment will be made by TfL pending any appeal of this decision." Unfortunately, with the lack of additional information to satisfy the public's interest, both Uber and critics of TFL's decision are fast turning the issue into a political drama. The issue is now becoming a debate between tech innovation versus regulatory red tape and a defence of the 'status quo'.

With the jobs of 40,000 Uber drivers at risk, Uber must answer the allegations. If necessary, the company must tighten its processes and procedures to ensure better due diligence and corporate governance. Taking action now would stand a better chance of the company winning an appeal. Rather than entering into a war of words which could undermine the company's long-term crediblity.

In a BBC Interview, Fred Jones, Uber's Head of Cities acknowledged that the company had got some things wrong. Clearly the licensing regulator feels that the company still hasn't learned from past mistakes.

But Tfl is also accountable for its decision. Let's trust in the appeal process to determine the right outcome for everyone concerned.

Sexual assaults

Uber has repeatedly come under fire for its handling of allegations of sexual assault by its drivers against passengers.

Freedom of Information data obtained by The Sun last year, however, showed that the Metropolitan Police investigated 32 drivers for rape or sexual assault of a passenger between May 2015 and May 2016.

Greyball

Tfl's statement also expresses concern about “its approach to explaining the use of Greyball in London”.

Uber has secretly been using a tool called Greyball to deceive law enforcement officials in a number of US cities where the company has flouted state regulations.

Greyball used individuals' personal data whom it believed were connected to local government. The software ensured that Uber drivers would not pick them up if they requested a ride on the app.

Uber denies ever using the software in the UK. But the company used Greyball in Portland, Oregon, Philadelphia, Boston, and Las Vegas, as well as France, Australia, China, South Korea and Italy.

DBS checks and medical records

TfL informed recently Uber that background checks on thousands of its drivers were invalid. The drivers were given 28 days to reapply for the procedure, or risk losing their licence.

In a separate controversy over the vetting of its employees, The Sun revealed Uber drivers were able to obtain falsified medical certificates which gave them the all-clear for service.

Workplace culture

A series of revelations about sexual harassment and sexism have criticised top managers in the company.

In February, Susan Fowler, a former engineer at Uber, wrote a 3,000-word blog post about the toxic culture in its Silicon Valley office.

The furore that followed led to two external investigations. These uncovered 215 separate complaints about sexual harassment and other workplace practices, and saw 20 employees fired.

CEO Travis Kalanick resigned shortly after investigators published their findings.

Tax Avoidance

The Financial Times reported in June 2017 that a loophole in the law allows Uber to avoid UK tax, undercutting rivals. Uber is using a gap in EU and UK tax rules to avoid incurring sales tax on the booking fees it charges drivers in Britain. This is a practice a senior politician said was unfair to competitors and defied the intent of the law.

The company is able to avoid VAT by exploiting a loophole in how the tax is collected for business-to-business sales across EU borders. This arises because it treats its 40,000 UK drivers as separate businesses, each too small to register for VAT.

It confirmed to Reuters that it does not pay value added tax on the fees it charges British drivers. By contrast, two of its main UK rivals, Gett and mytaxi, both said they do pay VAT on their fees. Both declined to comment on their rival's practice.